SINGAPORE (Oct 22): UOB Kay Hian is reiterating its “buy” recommendation on Asian Healthcare Specialists (AHS) with an unchanged target price of 33 cents following the orthopaedic group’s proposed issuance of convertible bond and grant of share option to Temasek Holdings-linked Vanda 1.
Vanda 1 is managed and controlled by Heliconia Capital Management, which is a subsidiary of Temasek.
AHS last week announced it has entered into an investment agreement to issue $5 million in convertible bonds due in 2021 to Vanda 1 at a conversion price of 25 cents per share, and a grant of share options another $5 million worth of shares at an exercise price of 32.5 cents per share.
The estimated net proceeds from the convertible bond and full exercise of share options are $9.92 million, which AHS intends to use to finance business expansion and grow its existing business.
See: Asian Healthcare Specialists eyes $10 mil investment agreement with Temasek unit
“Heliconia has a strong interest in the healthcare sector as it ties in well with regional trends of a growing middle class and ageing population,” says lead analyst Yeo Hai Wei in a retail report on Monday.
Yeo notes that the conversion price and option price are at premiums of 8.6% and 41.3%, respectively, over AHS’s IPO price of 23 cents.
“[We] believe Heliconia’s investment in AHS is a vote of confidence in AHS’s ability to ride on this secular tailwind,” Yeo says. “As the only listed player focused on the niche orthopaedic field, AHS offers investors a proxy to increased medical spending from an ageing population.”
At the same time, Yeo believes AHS could tap on Heliconia’s deep pockets and strategic networks to drive its growth in Southeast Asia. AHS could also possibly link up with Heliconia as a potential consortium partner to co-invest in regional peers when opportunity arises, the analyst adds.
As at 11.31am, shares in AHS are trading half a cent higher at 27 cents, implying an estimated price-to-earnings ratio of 18.9 times and a dividend yield of 1.9% for FY18.
